The federal government has announced plans to remove the long-standing cap that restricts Canadian pension funds from owning more than 30% of voting shares in a Canadian entity, finance minister Chrystia Freeland revealed during a press conference in Toronto on Friday.

This change, part of Monday’s fall economic statement, is part of a push to increase domestic investment and leverage the vast resources of Canadian pension funds.

“Canadian pension funds have over $3 trillion in assets and some of the world’s best investment expertise,” Freeland told reporters. “Our pension funds invest Canadian money. They’re run by Canadians who live here, who love Canada, and who would love to invest more here, closer to home.”

The decision comes after a review led by former Bank of Canada governor Stephen Poloz, which focused on catalyzing domestic investment by Canadian pension funds. The federal government plans to consult provinces on the implications for provincially regulated pension plans as part of the regulatory amendments.

With the cap lifted, pension funds like the Canada Pension Plan Investment Board (CPPIB) and the Public Sector Pension Investment Board (PSPIB) may have more freedom to invest in Canadian industries and entities.

Recent performance in real estate, however, has posed challenges for major Canadian pension funds. CPPIB reported a 5% loss on its property portfolio last fiscal year, while PSPIB faced a sharper 16% decline—the worst since the global financial crisis.

Rising borrowing costs and structural shifts in the sector have prompted pension funds to reconsider their investment strategies.

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